February 28, 2008

 

US Wheat Outlook on Thursday: Lower start seen as markets pull back

 

 

U.S. wheat futures are expected to start Thursday's day session lower on follow-through selling from the overnight and a pullback from recent rallies, traders said.

 

Chicago Board of Trade May wheat is called to open 20 to 30 cents per bushel lower. In overnight electronic trading, CBOT May wheat fell 19 cents to US$12.31.

 

Kansas City Board of Trade May wheat overnight slipped 24 cents to US$12.84 per bushel. Minneapolis Grain Exchange May wheat ended down 66 cents at US$16.81.

 

The markets are due for a setback after climbing to all-time highs, traders said. But dramatic price swings are likely to continue, and the markets could firm up and trade both sides after a weaker opening, they said.

 

Nearby CBOT and KCBT wheat for the past two sessions have closed higher after shrugging off early weakness. CBOT and KCBT March wheat are now trading without limits ahead of first notice day. MGE March wheat has been trading without limits since Monday.

 

The daily trading limits for deferred contracts at the CBOT and KCBT remains US$1.35. The daily limit for deferred MGE contracts is US$2.02 1/2.

 

There is not too much fresh news out for the markets to chew on, an analyst said. Weekly export sales were within trade estimates.

 

The U.S. Department of Agriculture said old-crop export sales for the week ended Feb. 21 were 308,600 metric tonnes and new-crop sales were 20,000 tonnes. Analysts had predicted total sales would be 100,000 to 600,000 tonnes.

 

Major buyers of old-crop wheat included Japan, which took 110,400 tonnes, and Egypt, which bought 55,000 tonnes. New-crop sales were primarily to Trinidad, which bought 17,000 tonnes for delivery in 2008-09, the USDA said.

 

U.S. wheat futures have rallied lately amid fears about tight supplies, but fundamentals suggest prices should begin to moderate in the latter part of 2008, Standard Chartered said in a research note. Prices should "moderate rather than slump over this year and next" given aggressive fund buying, it said.

 

Extreme volatility in the CBOT wheat market is one clue of a topping process in wheat, a technical analyst said. Chicago bulls' next upside price objective is to push and close July wheat, which represents the new crop, above major psychological resistance at US$12.00, he said. The next downside price objective for the bears is pushing prices below psychological support at US$11.00.

 

First resistance is seen at US$11.75 and then at US$12.00. First support lies at US$11.00 and then at US$10.50.

 

At the KCBT, the bulls' next upside price objective is pushing and closing prices above resistance at US$12.50, the analyst said. The bears' next downside objective is pushing and closing prices below solid support at US$11.35, he said.

 

First resistance is seen at US$12.15 3/4 and then at US$12.50. First support is seen at US$11.50 and then at US$11.35.